Monday September 9, 2013
LMA Nominated As One of Tallahassee’s Best Businesses
Before we race into this edition, we’d sure appreciate your support of our recent “Tally Awards” nomination as one of the top businesses in the Capital City area. By reading the information in our closing of this newsletter and voting on-line for LMA at CCYS Tally Awards you will also be supporting a vitally important charitable organization, Capital City Youth Services. Now, let’s cover some of the major issues in our industry over the past week or so as well as upcoming events.
Fall Committee Weeks Set…..So, What’s On Your Bucket List for the 2014 Session?
Believe it or not it’s here, so we are charging our laptops, cell phones and other electronic gadgets, putting on our walking (actually our running) shoes and informally kicking off Florida’s 2014 Legislative Session. Yes, it’s none other than the beginning of the “committee weeks” which always signals the start of another round of political chess, brilliant strategies and occasionally heard statements such as, “politics makes for strange bedfellows. “All kidding aside, legislative committees will begin meeting for one week each month between September and December in advance of the 2014 regular session. The official committee week dates are September 23-27, October 7-11, November 4-8 and December 9-13; and we, of course, will be there right in the middle of everything advocating for your interests and keeping our eagle eyes wide open for all that is going on. We want to hear what’s important to you and what would make your life in and out of the office easier. We will report to you what we are hearing preliminarily. As of right now, it looks like a couple of groups are emerging as the leaders of insurance policy in our state and we are already monitoring their activity very closely. Please send us your thoughts/comments in the coming weeks so we can laser beam into those areas that you are passionate about!
Compliance Reminder: Insurers, Agents and Adjusters Required To Report Felony Pleas, Convictions
This is an important reminder for appointing entities (insurers, independent adjusting firms who appoint adjusters) about their obligation under the Florida Insurance Code to report to the Department of Financial Services (DFS) in writing when they become aware that an appointee has pled to or been found guilty of a felony crime. Section 626.451(4) states that each appointing entity shall advise the DFS in writing within 15 days after it or its general agent, officer, or other official becomes aware that an appointee has pleaded guilty or no contest to or has been found guilty of a felony after being appointed. This requirement exists, regardless of whether the court withholds adjudication in the licensee’s case. In the past, there has been confusion among some in the industry who were of the opinion that insurer reporting was not required when a court withheld adjudication. Due to the wording of the above referenced statute, it appears vital for insurers and other appointing entities to educate and remind their general agents, officers, producer licensing staff and other officials about the reporting requirement and the company’s procedures to follow when becoming aware of an appointee’s felony case. Likewise, individual licensees (agents, adjusters, customer representatives, etc.) have a similar obligation under the Code to self-report when he or she has pled to, been found guilty of or convicted of a felony. Section 626.451(7) states that each licensee shall advise the department in writing within 30 days after having been found guilty of or having pleaded guilty or no contest to a felony or a crime punishable by imprisonment of one year or more under the laws of the United States, any state of the United States, or any other country, without regard to whether a judgment of conviction has been entered by the court having jurisdiction of such cases. Written notifications by appointing entities and individual licensees can both be addressed to the Department of Financial Services, Division of Agent and Agency Services, Bureau of Investigation, 200 East Gaines Street, Tallahassee, Florida 32399-0320. We hope you have found this compliance reminder beneficial and stand ready to answer any questions you may have about this or other compliance issues should you care to contact us.
Liberty Mutual Fire Wins Important Federal Case Regarding Sinkhole Claims And Structural Damage
On September 3rd in Tampa United States District Judge Steven Merryday issued a much anticipated order in Gonzalez v. Liberty Mutual Fire Insurance Company regarding what constitutes “structural damage to a building” in the context of a sinkhole claim. Both Section 627.706, Florida Statutes (2010), and the insurance policy, effective November 1, 2010, state, “Sinkhole Loss means structural damage to the building, including the foundation, caused by sinkhole activity. Contents coverage shall apply only if there is structural damage to the building caused by sinkhole activity.” Erasmo and Maria Gonzalez contended in their law suit against Liberty Mutual that “structural damage to the building” meant “any damage to the building,” an argument that depended on the truth of the proposition that all “building damage” is “structural damage.” The insurer countered that the modifier “structural” conveyed a distinguishing meaning and, accordingly, meaningfully modified the phrase “damage to the building” and that “structural damage to the building” means “damage to the structural integrity of the building.” In the past, several circuit courts in Central Florida have ruled that “structural damage” as referred to in the Insurance Code, policy and sinkhole loss endorsement refer to any damage to the building, including any minor or cosmetic damage. Several federal courts, citing and referring to the above mentioned Florida circuit court decisions, have also ruled that structural damage means any damage whatsoever to covered buildings. However, the federal court in Gonzalez v. Liberty Mutual has ruled that the withdrawal of “structural damage” from the governing and defining context of “structural damage to the building” has enabled a misconstruction of both statute and contract by the prior courts. In the present case, Judge Merry day reminds us that plain meaning, context and the dictates of syntax continue to govern, even in an insurance policy. “If the language used in an insurance policy is plain and unambiguous, a court must interpret the policy in accordance with the plain meaning of the language used so as to give effect to the policy as it was written.” Interestingly, in a 1995 case the Louisiana Supreme Court found that “structural damage” means damage to the structural integrity of the home, not merely superficial damage to non-load bearing parts of the home. Otherwise, the word “structural” would have no meaning in the contract and could have been omitted altogether.” Further, the Florida Building Code defines “structural” as any part, material or assembly of a building or structure which affects the safety of such building or structure and/or which supports any dead or designed live load, the removal of which would be expected to cause all or a portion to collapse or fail. In analyzing statutory changes dating back to 2005, Judge Merry day also found support for concluding that the legislature intended to impose a more narrow definition of structural damage than has been employed more recently by Florida and federal courts. In his conclusion, the judge sided with Liberty Mutual and stated that the judgment in this case must declare, “‘Structural damage to the building’ is damage to a part, material, or assembly of the building that affects the stability of the building or that supports a dead or designed live load, and the removal of which part, material, or assembly could be expected to cause a portion of the building to collapse or fail.” Just how far reaching this case will be and whether it is appealed remains to be seen, however, it is a substantial court victory for the industry and may help guide the resolution of future sinkhole disputes. Click HERE if you would like to read the federal court’s order.
Citizens Claims Committee: Sinkhole Picture Continues To Improve
On August 29th, the Citizens’ Claims Committee chaired by Board Member Don Glisson, met to discuss a number of issues and receive statistical updates from corporate managers. The claims data and information shared with board members was mostly positive, including some particularly encouraging news regarding sinkhole claims through June 30th of this year. Committee members and Citizens representatives concurred that key provisions of SB 408 are, in large part, driving the improving situation with new sinkhole claims volume down 58 percent through the second quarter of this year over last year’s numbers. In fact, Jeff Lambert, Assistant Director of Claims for Citizens noted that the sinkhole claim volume is down to the type of numbers the insurer was seeing in 2008. As of June 30th the claims department had 2,599 open claims which is 41 percent less than the number open at the end of the second quarter 2012. Lambert also noted that cycle times have come down significantly and that a number of other improvements have been seen. He also noted that for 2013, Citizens changed who handles neutral evaluation conferences and processes from outside attorneys to internal company staff. According to Lambert, this process change has resulted in a savings through June 30 of approximately $350,000. Corporate staff also reported that the water claim internal review group’s work appears to be meeting with success. Because water damage claims make up such a large percentage of Citizens’ overall claim volume, this group was established in order to carefully review and evaluate water damage claims and related vendor invoices. As of the claims committee meeting the group had reviewed about 100 water claims evaluating closely water extraction vendor invoices in balance with industry standards. The group’s work has resulted in extraction vendor invoices being reduced on average by $1,600. The litigation management report also revealed mostly good news with new litigation suit assignments remaining flat and in line with the same period during 2012. The report also emphasized that new sinkhole litigation assignments are down 51 percent, another indication of the improving sinkhole picture. On a not so good note, it was also reported that assignment of benefits (AOB) litigation is a growing driver of new litigation and now responsible for 17 percent of all new assignments to Citizens’ attorneys. Please click HERE to view the agenda and statistical documents prepared by Citizens’ staff for the Claims Committee meeting.
Citizens Expecting Significant Insurer Participation in Clearinghouse Program
On August 26th, the Citizens Actuarial and Underwriting Committee met via conference call, to receive in-depth updates from corporate staff on a number projects and program areas. An important agenda item was an update on the status of the clearinghouse program and what we can expect from an insurer participation perspective. According to Steve Bitar with Citizens, five and possibly as many as 16 private market insurers may be ready to immediately “onboard” with the clearinghouse when the statutorily mandated January 1 kick-off date arrives. Bitar told committee members that this possibility is a result of some 30 successful meetings with private insurers to discuss the clearinghouse program, answer insurers’ questions and clear up misconceptions about the program. Bitar further noted that a number of insurers expressed enthusiasm about their upcoming participation in the clearinghouse. The Citizens clearinghouse team has also been working closely with the agent associations, which appeared to please committee chairman John Rollins. As noted in our last newsletter, a contract with Bolt Solutions to provide the software “engine” to run the clearinghouse and link private market insurers and consumers was recently approved by the corporation’s Board of Governors. Bolt and Citizens are working together rapidly to conclude new agreements for insurers and with agents (limited servicing agreement) who will have no formal appointment agreement in place. During the briefing it was mentioned by Mr. Bitar that about half of all new business placed with Citizens last year came from agents with limited markets, captive agents and the like. Bitar and some committee members went on to recognize that the clearinghouse will be a way to thoroughly scan the participating marketplace, identify all available options and provide consumers with choices. The program will also allow Citizens to truly enforce the 15 percent requirement on new business when a participating insurer is willing to write essentially like coverage at a rate no more than 15 percent greater than the corporation’s rate. A similar rule exists on renewal business and requires current policyholders at renewal to accept coverage from a participating insurer if the insurer’s rate is equal to or less than Citizens’ renewal rate. During his presentation, Mr. Bitar appeared highly confident that the clearinghouse program will be a win-win situation for everyone involved. Consumers will likely be presented with more cost effective options for coverage; agents and participating insurers increased writing opportunities. Committee Chairman John Rollins said about the program, “It is a total transformation of the way people buy homeowners insurance in the State of Florida. This is like the iPhone for insurance in Florida. It is going to transform every way the consumer thinks about shopping for homeowners insurance.” Let’s hope, as well, that the clearinghouse program meets its intended objective of reducing Citizens’ size and exposure, and help the corporation truly become Florida’s market of last resort. We’ll keep you posted on important developments as the program’s January 1 start-date approaches. Please click HERE to view the agenda and statistical documents prepared by Citizens’ staff for the Actuarial and Underwriting Committee meeting.
Long-Time Fraud Division Leader and Interim Director Made Permanent
Jay Etheridge, Deputy Chief Financial Officer for the Department of Financial Services’ law enforcement divisions has announced that Major Simon Blank has been appointed Director of the Division of Insurance Fraud. Blank’s appointment to the directorship was effective on September 3rd after serving for a period of time as Interim Director. Prior to beginning a career in law enforcement, Blank served his country honorably in the United States Air Force from 1982 through 1986. After reaching the rank of sergeant, he completed his service with an honorable discharge. In 1988 Simon began his law enforcement career when he joined the Royal Palm Beach Police Department in West Palm Beach. During his tenure with the Royal Palm Beach Department he served as a patrol officer, patrol sergeant, narcotics, person and property crime detective, crime scene technician, internal affairs officer and supervised the Criminal Investigations Division. In January 1996 Simon joined the Division of Insurance Fraud and during the 17 years prior to becoming Director he earned the ranks of Lieutenant, Captain, Bureau Chief of Workers’ Compensation Fraud, and ultimately Major of Law Enforcement Operations. Simon is a seasoned insurance fraud veteran and we wish him the best of luck as he takes the reins of the nation’s top fraud division.
Staged Motor Vehicle Accident Conviction A First For Lee County
On August 29th the Department of Financial Services announced the conviction of Alain Guevara, 29, of Lehigh Acres for staging a motor vehicle accident. Guevara pleaded guilty at the beginning of a jury trial scheduled in the 20th Judicial Circuit Court, making it Lee County’s first conviction involving a staged motor vehicle accident, which carries a two-year minimum mandatory sentence. According to a release issued by the Department, an investigation conducted by the Division of Insurance Fraud (DIF) revealed that Guevara and an accomplice staged a vehicle crash in August 2012 and then knowingly presented false, incomplete and misleading information for payment of a PIP claim. The initial accident report stated that a rented truck, driven by an accomplice, failed to comply with a stop sign and collided with the vehicle driven by Guevara. Upon review of the report and damage, one of the insurance companies that received claims from the staged accident reported suspicions to DIF, and an investigation determined that damage to the vehicles was not consistent with the reported accident scenario. A vehicle damage consistency report found that the physical evidence showed that the car was not in motion at the time of impact and that the description provided at the scene of the accident was falsified. The investigation included the subpoena of phone records, which revealed that the two parties involved in the crash were not strangers and that there were repeated calls between the drivers immediately before and after the accident occurred. The insurance companies that received the fraudulent claims were Allstate Insurance Company and REPWEST Insurance Company.
Texas Windstorm Insurance Association Executive Joins Citizens
Late last month Citizens CEO Barry Gilway announced that Randy Wipf, former Vice President of Underwriting and Agency Services for the Texas Windstorm Insurance Association (TWIA) had joined the Citizens leadership team. Mr. Wipf has assumed the position of Vice President of Underwriting after spending the last 15 years in a similar position with the TWIA. Randy has 36 years of personal and commercial lines underwriting experience, including 21 years with The St. Paul Companies/Travelers. Randy received his B.S. degree in Business Administration from The University of South Dakota and has brought a wealth of knowledge and experience to his new position with the corporation. In announcing his appointment, Citizens noted that Randy’s years of underwriting experience and his in-depth understanding of the unique role of Citizen’s in Florida, through his experience at TWIA, make him an excellent fit for this position. Welcome, Randy, we wish you the best.
Major Risk Transfer Encouraged By ABIR President
On August 26th during a speech given at the NAIC’s Summer national meeting in Indianapolis, Brad Kading, President and Executive Director of the Association of Bermuda Insurers and Reinsurers (ABIR), encouraged state and federal leaders to move catastrophic risk to private reinsurers to reduce the risk of surcharges that weigh on taxpayers and ratepayers in states vulnerable to natural disasters. In its release characterizing the speech Kading made before the NAIC’s Property & Casualty Committee, ABIR particularly noted the following comments by Mr. Kading, “With record amounts of reinsurance capital available, now is the time for state and federal policymakers to transfer earthquake, hurricane and flooding risk to reinsurers. By working with additional capital partners, reinsurers can now take on more catastrophe risk to meet the demand for more residential earthquake protection if the secondary mortgage markets begin to require earthquake coverage on new mortgages as a way to reduce the threat to mortgage banks’ balance sheets. Transferring risk to reinsurers will, among other benefits, reduce the potential of future federal debt and related taxpayer subsidies for the National Flood Insurance Program; and reduce the threat of hurricane taxes to pay off bond debt for the Florida Citizens Property Insurance Corporation and the Florida Hurricane Catastrophe Fund. Convergence of capital markets and catastrophe reinsurance provides the opportunity for governments to transfer insurance risk to investors while simultaneously reducing the threat of taxpayer subsidies and bailouts of overburdened state residual market facilities. In California, Florida, Louisiana and North Carolina, state leaders have transferred insurance risk directly to capital markets and reinsurers via Bermuda. In fact, the New York Metropolitan Transit Authority recently transferred flood risk directly to capital markets via a Bermuda SPV. ABIR’s members have led the reinsurance industry in developing a scientific approach to catastrophe underwriting; innovating to better serve customers and establishing highly regarded enterprise risk management programs. Furthermore, the Bermuda Monetary Authority applies a robust set of regulatory solvency requirements to these reinsurers. These practices help the major reinsurers retain their important credit ratings, better meet shareholder expectations and demonstrate resilience to global customers. Unfortunately, if the capital currently available is not deployed to take up catastrophe risk, it could be returned to shareholders. Ill-conceived regulatory or tax burdens could limit risk pooling which would then segregate capital, limit the ability to diversify risk and limit the ability to take on large risks while also reducing competition in markets.”
The Office Issues Informational Memorandum to Florida’s Annuity Writers
On August 30th the Office of Insurance Regulation issued an Informational Memorandum (OIR-13-02M) to all insurers issuing annuity contracts in Florida to remind them about compliance with recent statutory changes. The Memorandum addresses changes to Section 626.99 of the Insurance Code enacted in SB 166 (Chapter No. 2013-163, Laws of Florida) during the 2013 Session of the Florida Legislature. The statutory changes in question will take effect on October 1, 2013. Please click on REMINDER in order to view the Informational Memorandum issued by the Office.
On Our Mark, Get Ready, Set…
We are excited about the 2014 Legislative Session! A busy, busy time for us here at LMA; but we certainly haven’t taken any summer vacations while the hot days of summer were (and still are) here. We know you appreciate our hard work, because you tell us all the time. There is, right now, an opportunity to help LMA grow in a very special way. As mentioned in our opening, LMA has been nominated for a Tally Award and voting has begun at the link below. We would very much like for you to show us some “love” by voting for us under the Marketing & Consulting category. For those who are not familiar with the Tally Awards, here is what you will read on the website:
An Unforgettable Event
The 2014 Tally Awards will be presented at an unforgettable formal black and white awards gala on February 8, 2014. The evening will include special recognition of specific Tally Awards winners throughout the night, a silent auction and the opportunity to celebrate with Tallahassee’s favorites! You will not want to miss this magnificent celebration in black and white splendor, with the proceeds benefiting Capital City Youth Services.
DATE: Saturday, February 8, 2014;
LOCATION: Tallahassee Automobile Museum, 6800 Mahan Drive, Tallahassee, FL
ATTIRE: Black and White Formal
So, we are thanking you in advance for your ALWAYS support and stay tuned for the results.
As always, warmly – Lisa
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